The party has indicated a possible hike in prices of petroleum products, saying that they will be bare minimum.
The Union cabinet is meeting on Thursday to consider a hike in the prices of petrol and diesel. The petroleum ministry has prepared a note suggesting raising petrol prices by Rs4 a litre, but sources in the UPA said this was unlikely to be accepted by the cabinet, which may go in for a lower increase.
The government may also stop short of full deregulation of motor fuel prices, according to indications from the Congress. The petroleum ministry has been lobbying hard for complete removal of subsidies on petrol and diesel along with a price increase for cooking gas and kerosene.
Conscious of the Opposition threat to launch a nationwide stir on
the price rise issue, the Congress has urged the government to keep the hike to a bare minimum and to cushion the impact. The Congress core committee, including chairperson Sonia Gandhi and prime minister Manmohan Singh, discussed the Kirit Parikh committee report which had urged scrapping of subsidies on petrol and diesel in the interest of economic efficiency.
The details of the hike will be finalised at the cabinet meeting.
“Sometimes an increase is absolutely unavoidable, and if that is so, then it should be kept to the bare minimum,” said party spokesperson Abhishek Singhvi. The Congress, committed to stand by the aam aadmi, is now worried that the overall rise in prices will undercut its support base. A complete removal of subsidies will take petrol prices north of Rs 80 per litre if crude oil prices go back to their pre-recession levels.
While a modest hike of around Rs 2-3 per litre in petrol and diesel can eliminate losses for state oil companies, most don’t expect the cabinet to assent to the Rs 100 per cylinder gas price hike recommended by the Parikh committee.
The low increase will, however, only postpone the problem of under-recoveries by state oil companies as crude prices are widely expected to run up again in the coming months, if not weeks. The move is also unlikely to appease private petroleum companies like Reliance Industries and Essar Oil who are seeing their investments worth thousands of crores of rupees literally rust away as consumers have turned to the lower-priced, subsidised outlets of state oil companies. In anticipation of deregulation, one private firm had even announced an expansion of its retail network.
The difference between international crude prices and the selling prices set by the government is likely to be around Rs 45,000 crore, out of which only Rs 12,000 crore has so far been promised by the government to its oil retailing companies. Parikh, who submitted his report last week, had said that his recommendations would reduce the total shortfall to just Rs15,000 crore.
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